ASSIGNMENT ON FUNDAMENTAL ANALYSIS

COMPANY: ACC LTD

SUBJECT: Security analysis and portfolio management

SUBMITTED TO: Ms. MONIKA KALANI
SUBMITTED BY: PARTEEK GUPTA
ROLL NO. A-05
SECTION. Q1806
COURSE: M.B.A. (INT.)
LOVELY
PROFESSIONAL
UNIVERSITY

COMPANY INFORMATION:
Established in 1936 as a merger of 10 cement companies, ACC Limited (hereaftercalled
ACC) is the only cement company that figures in India’s list of Consumer Super Brands.
Formerly called The Associated Cement Companies Limited - (the companychanged
its name in 2006) - ACC’s corporate office is located in Mumbai. The company has14 modern cement
factories, more than 30 Ready Mix Concrete (RMX) plants, 20 salesoffices and several zone offices. It has
a workforce of about 10,000 persons and acountrywide distribution network of over 9000 dealers.
The house of TATA was intimately associated with ACC up to 1999, after which
the Tata Group sold all 14.45% of its shareholding in ACC in three stages to subsidiary
companies of Gujarat Ambuja Cements Limited (GACL).
In January 2005, the Holcim Group of Switzerland announced its plans to enterinto a
long-term strategic alliance with the Ambuja Group by acquiring a majority stake inAmbuja Cements India
Ltd. (ACIL), which at the time held 13.8% of the total equity sharesin ACC. Holcim simultaneously
announced its bid to make an open offer to ACCshareholders, through Holdcem Cement Pvt Limited and
ACIL, to acquire a majorityshareholding in ACC. An open offer was made by Holdcem Cement Pvt.
Limited along withAmbuja Cements India Ltd. (ACIL), following which the shareholding of ACIL
increased to34.69% of the Equity share capital of ACC.
ACC has 12 captive power generating plants across 7 locations, with a captivepower
generating capacity of 241 MW. It also has wind power plants at Madukkarai andLakheri, which together
generate 16.5 MW electricity from wind power ACC plans to investRs. 30 billion as capital expenditure
over the next two years. This would result in enhancingthe total cement manufacturing capacity to 30.58
MTPA and the captive power generationcapacity to 351 MW by the end of 2010.

ACC has also extended its services overseas to the Middle East, Africa &South America,
where it has provided technical and managerial consultancy to a variety ofconsumers, and also helps in the operation
and maintenance of cement plants abroad. Theoverseas contract with YANBU Cement Company, Saudi Arabia for
management andoperation of its cement plants, is an ongoing relationship for the last 29 years and has beenrenewed up
to February 28, 2011.
Tax
66.43
140.17
369.10
491.70
524.60
Reported Net Profit
378.39
544.18
1,231.84
1,438.59
1,212.79
Total Value Addition
1,769.04
1,565.01
2,498.85
3,116.27
4,266.54
Preference Dividend
0.00
0.00
0.00
0.00
0.00
Equity Dividend
124.97
147.61
280.92
375.02
375.33
Corporate Dividend Tax
17.53
20.70
39.40
63.74
 6

3.79

Per share data (annualised)

Shares in issue (lakhs)

1,785.34
1,845.08
1,872.78
1,876.24
1,876.82
Earning Per Share (Rs)
21.19
29.49
65.78
76.67
64.62
Equity Dividend (%)
70.00
80.00
150.00
200.00
200.00
Book Value(Rs)
89.46
115.76
167.81
221.33
262.56
From the above balance sheet, we can see earning per share (EPS) and net profit are reducedby 2008. It is
all because in 2008 there is increase in inflation rate and economy was goingthrough recession.
While there are some industries which are not much effected by economy or they use to move
opposite direction but not perfectly e.g. Pharmaceutical industry.
Life cycle:
 Maturity stage: ACC is going through its maturity stage, as its sales are at peak.
 Introductory stage: In 1936, when company was established it was its introductory
stage.
 Growth stage: 2000-2008 was it growth period because its sales volume got growth
year by year.
 Decline stage: It could in next 20-30 years if other alternative or technique has been
developed.

PORTER’S FIVE FORCE MODEL:

THREAT OF NEW ENTRANTS:
ACC has threat from new entrants like TATA; Reliance etc can enter into this industry.
But there are certain barriers to their entry. These are:
•
Availability of raw material
•
Restrictions on entry by government into cement industry
•
Cement industry requires a huge investment
•
Switching costs are high in cement industry
BARGAINING POWER OF SUPPLIERS:
Suppliers have very much impact on cement industry because of the following reasons:
•
Raw materials used in cement are gypsum, fly ash and slag. There are few suppliers
of these materials.
•
Quality of finished goods i.e. cement is very important for ACC ltd.
•
As already said, there are high switching costs in cement industry.
•
There is no substitute to the raw material used in cement.

BARGAINING POWER OF BUYER:

ACC ltd plays the role of buyer. It has following bargaining powers:
•
There are only few buyers of raw material of cement.
•
ACC has major stake in cement industry i.e. 11% of the world.
THREAT OF SUBTITUES:
It has threat from Ambuja cements, Birla cements etc.
RIVALRY AMONG THE COMPETING FIRMS IN INDUSTRY:
In spite of huge stake in cement industry, it is difficult to be on the top because of the other
competing companies i.e. Ambuja, Birla, and Binani etc.
Competitor analysis
ACC, with an installed capacity of 22.63 MTPA, enjoys an 11% market share in India, whichwith its total
installed capacity of 207 MTPA, is the second largest cement producing countryin the world. ACC’s
nation-wide presence and brand image ensures a competitive edge andhelps it to withstand regional
fluctuations in prices and also to adapt its distribution to marketplace needs. Its key competitors are as
follows:
Company
Capacity (in MTPA)
ACC
22.63
Ambuja Cements
18.50
Binani Cements
6.50
Birla Corporation Limited
5.80
CCI
3.85
Century Textiles
6.80
Grasim
16.75
India Cements
8.94
Jaypee Group
13.50
Kesoram Industries
5.60
Lafarge
5.50
Madras Cements
10.00
Ultratech Cement
18.20
Zuari Cement
3.50